Raydiant’s new series, the Future of Shopping, interviews experts and thought leaders with a goal of better understanding what organizations can do to prepare themselves for what lies ahead.
The following is an interview we recently had with Frank Cespedes, Senior Lecturer at Harvard Business School and Author of ‘Sales Management That Works: How to Sell in a World That Never Stops Changing’.
How has consumer shopping behavior evolved over the past 5 years?
It’s an omni-channel buying world. Consumers are both online and offline at multiple times throughout their buying journeys. That has big implications for relevant sales models, cost-effective marketing media, pricing, and channel management.
What are the top 3 trends shaping the ways consumers shop?
Let me cite shopping issues for consumers and for suppliers:
Shopping has always been a social experience as well as an economic transaction for millennia. And the pandemic is unlikely to change that. For example, in 2019 (before the pandemic), Ecommerce as a percentage of total U.S. retail sales was 11.4% (Dept. of Commerce data). In Q2 of 2020 (maximum lockdown conditions, so far, in the U.S. and most other countries), it increased to 15.7% (a gain of less than 5% when stores were closed or limited to 25-50% of capacity); and it has been trending down every quarter since then: down to 13% by Q2 of 2021. But when I ask executives to guess the actual percentages, I routinely get estimates between 30 – 60% — in other words, many companies are orders-of-magnitude off in their assumptions about this key aspect of shopping behavior.
This does NOT mean the internet is marginal in affecting how consumers shop. Consumers now have comparative price, product, and user-experience information available to them BEFORE they get to the point-of-sale or speak with a Sales or Service rep. As a result, the skills required of sales people are increasing, fast. The days of a sales or service person being essentially an organic version of direct mail or product literature are disappearing; reps in retail and most other industries must add value when they do interact with customers.
The costs of Marketing via social media and other online channels have increased steadily, and the pandemic accelerated the costs. Online is an increasingly expensive, cluttered medium with diminishing returns, and also very high-maintenance, because you must maintain expertise about the changing algorithms of multiple online vehicles whose relative popularity can change suddenly: for instance, how many U.S. CMOs even knew how to spell Tik Tok as recently as 2 years ago?
What’s the future of shopping?
“Predictions are always risky, especially about the future.” That said, it is now and likely to remain an omni-channel buying world, and that requires the development and management of a multi-channel response by sellers.
Second, do not simply follow fads or assume that it’s a “digital eats physical” world. Online and offline are now typically complements, not substitutes. And online marketing channels are increasingly a deep-pockets/big-numbers game for well-resourced incumbents, not for newer entrants or smaller firms in the industry.
Third, the above means that ignoring other marketing channels is myopic and self-defeating (e.g., signage: note how a number of tech firms have now started using old-time billboard ads because the online channels are so expensive.)
What are 3 actionable steps an organization can take to prepare for the future?
First make sure that you understand cause-and-effect links in your customer-conversion process.
Second, monitor and manage the allocation of marketing/sales resources so they reflect how those links work today, not yesterday, in your market: to do that, you need data tools, not just a CRM system.
Third, performance management practices, including a cadence of performance reviews of your business-development people is required (because much of the relevant data for understanding and maintaining data about buying journeys is lodged in the heads of those people, not the CRM system), but good performance reviews are probably the most under-utilized management lever in most companies.